Fann Contracting, Inc. v. Garman Turner Gordon LLP

593 B.R. 625
CourtDistrict Court, D. Nevada
DecidedSeptember 27, 2018
DocketCase No.: 2:17-cv-03126-GMN
StatusPublished
Cited by2 cases

This text of 593 B.R. 625 (Fann Contracting, Inc. v. Garman Turner Gordon LLP) is published on Counsel Stack Legal Research, covering District Court, D. Nevada primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fann Contracting, Inc. v. Garman Turner Gordon LLP, 593 B.R. 625 (D. Nev. 2018).

Opinion

Gloria M. Navarro, Chief Judge

Pending before the Court is the bankruptcy appeal of Fann Contracting, Inc v. Garman Turner Gordon LLP , Case No. 2:17-cv-03126. Appellant Fann Contracting, Inc. ("Appellant") filed an opening brief, (ECF No. 11).1 Appellee Garman Turner Gordon LLP ("GTG") filed an answering brief, (ECF No. 13), to which Appellant replied, (ECF No. 21). For the reasons stated herein, the Court VACATES the underlying decision of the United States Bankruptcy Court for the District of Nevada.

I. BACKGROUND

The instant appeal centers upon the bankruptcy court's order granting a contingency award and expense award to GTG (the "Fee Award") over Appellant's objection. (Opening Br. at 1-2, ECF No. 11). Appellant is an unsecured creditor who performed construction work on certain real property (the "Frontier") that was the subject of a dispute between several parties in state court, as well as the Chapter 11 proceeding giving rise to the instant appeal. (See Mot. for Stay Relief at 942-45, Suppl. Excerpts of R. ("SER") Tab 37, ECF No. 15). Grand Canyon Ranch, LLC ("Debtor") filed a complaint against Appellant on August 14, 2013, asserting contract and tort-based claims arising from Appellant's work on the Frontier. (Id. at 944).

On July 20, 2015, Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. (Chapter 11 Voluntary Petition, Excerpts of R. Tab ("ER

*628Tab") 1, ECF No. 12-1). On January 5, 2016, the bankruptcy court appointed Brian Shapiro (the "Trustee") as the Chapter 11 Trustee for the Debtor's Estate (the "Estate"). (See Order, ER Tab 3, ECF No. 12-3). On February 10, 2016, the Trustee filed an application to employ GTG as attorneys for the Trustee under 11 U.S.C. § 327(a) and for approval of a contingency-based fee agreement pursuant to 11 U.S.C. § 328(a) (the "Employment Application"). (See Employment Appl., Tab 4, ECF No. 12-4).

GTG agreed to represent the Trustee on a contingency fee basis under their agreement (the "Retention Agreement"), on the grounds that the Estate held "few in any assets, other than recovery actions," and held "no liquid assets." (See Retention Agreement at 340, Ex. 2 to ER Tab 15, ECF No. 12-15). Pursuant to the Retention Agreement, the Trustee and GTG agreed to a contingency fee of 35%, which would increase to 40% if a reorganization plan was reached, or 45% if the action continued until after the filing of a post-trial motion or a notice of appeal. (Id. ).

The Employment Application provides that "[t]he contingent fee is calculated prior to the payment of expenses, and the fee will be calculated based on any sums recovered, held, or distributed by the estate, including the value of in-kind or non-monetary distributions." (See Employment Appl. at 47-48). The Employment Application further represented that GTG had already conducted an investigation of the matter and, accordingly, the Trustee requested that GTG be employed nunc pro tunc to the date of the Trustee's appointment. (Id. at 51-52).

On March 15, 2016, the bankruptcy court held a hearing on the Employment Application during which GTG represented to the court "[t]here are no assets, as you know, in this case." (See Hr'g Tr. at 54:18-19, ER Tab 5, ECF No. 12-5). On March 17, 2016, the bankruptcy court approved the Employment Application. (See Employment Order, Ex. 1 to ER Tab 15, ECF No. 12-15). In the Employment Order, the bankruptcy court stated "[w]ith respect to fees, GTG will file a disclosure regarding its compensation which discloses the total amount GTG will be compensated under the Retention Agreement and the manner in which the fee was calculated, and describes the benefit GTG provided to the estate." (Id. at 336). The bankruptcy court further ordered that notice of the disclosure be provided to all creditors or parties-in-interest who would otherwise receive notice of a fee application under 11 U.S.C. § 330. (Id. ).

On August 30, 2016, the Trustee filed its first proposed settlement ("First Settlement Motion") which contemplated a sale of the Frontier, over which various parties filed claims in state court ("Canyon Rock Parties"). (First Settlement Mot. at 60-61, ER Tab 6, ECF No. 12-6). In exchange, the Canyon Rock Parties would waive all claims to the Frontier and provide a $780,000 cash payment to the Estate, after which the Frontier would be sold to an entity of the Canyon Rock Parties' choosing free and clear of all encumbrances. (Id. at 61).

On April 24, 2017, the Trustee filed a second proposed settlement ("Second Settlement Motion") which would resolve claims between the Estate, Canyon Rock Parties, and an additional group of parties with adverse claims (the "Mared Parties"). (Second Settlement Mot., ER Tab 7, ECF No. 12-7). The Second Settlement Motion stated the Mared Parties would pay $1.75 million to the Estate in exchange for a transfer of the Frontier to the Mared Parties free and clear of all liens, claims, and encumbrances and all of the Estate's remaining assets, including any of the Estate's *629personal property located at the Frontier with the exception of, inter alia , the Estate's claims against Appellant. (Id. at 116-17). The Second Settlement Motion further provided that the Canyon Rock Parties' designee "will be deemed to have an allowed secured claim in the amount of $900,000." (Id. at 117).

On May 17, 2017, during a hearing, the bankruptcy court found the entirety of the Frontier was not part of the Estate's property because a prior quitclaim deed effectively transferred a portion to Canyon Land Holdings, LLC ("Holdings"). (Hr'g Tr. 170:18-71:1, 191:19-25, 193:17-22, ER Tab 8, ECF No. 12-8). The bankruptcy court subsequently held a hearing on the Second Settlement Motion on June 8, 2017, at the conclusion of which, the court ordered supplemental briefing on how the northern parcel of the Frontier became part of the Estate's Property in the proposed settlement, as well as briefing on authority concerning the interplay between 11 U.S.C. § 363, governing sales of a debtor's property, and Federal Rule of Bankruptcy Procedure 9019, governing compromises and settlements in bankruptcy. (Hr'g Tr. at 251:1-8, ER Tab 9, ECF No. 12-9).

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Bluebook (online)
593 B.R. 625, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fann-contracting-inc-v-garman-turner-gordon-llp-nvd-2018.